UNION BUDGET 2020 - 2021 INDEX Key Highlights - Economy Key Highlights – Miscellaneous Tax Proposals Market Movements: Equity & Debt Economic Update: • Budget Summary • Revenue Snapshot • Expenditure Snapshot Sector Updates Equity Market: Outlook and Strategy Debt Market: Outlook and Strategy KEY HIGHLIGHTS Though the Union Budget is essentially a Statement of Account of public finances, it has historically become a significant opportunity to indicate the direction and the pace of India’s economic policy. The 2020-21 Union Budget was presented in continuation to strengthen its blueprint laid last year for creating a $5 trillion economy by 2025. This budget is woven around three prominent themes dedicated to provide “Ease of Living” to all citizens and to reinforce the Government’s intention to improve the rural economy by boosting credit and investment in the agriculture and rural sector. Overall, the Indian society, polity and economy have shown remarkable resilience in adjusting with the structural reforms. This year’s budget assumes importance for the current political regime due to it being the first full year budget of the government after coming back to power with a thumping majority. With this background, we present the key highlights of the Union Budget 2020-21. ECONOMY • Total expenditure in BE* 2020-21 is slotted to increase by 12.7% over RE* 2019-20. • Gross tax revenues are expected to grow by 10.8% in FY21, maintaining a double digit growth rate for the sixth year in a row. • Nominal GDP* is estimated to grow at 10% in 2020-21BE. Real GDP growth is expected to be 6.0% (assuming a 4% target inflation rate as per BE). • Direct taxes in 2020-21BE are projected to grow at 12.7% over 2019-20 RE; Indirect taxes budgeted at Rs. 10.99 lakh crore an increase of 11.1% • Fiscal deficit projections 2020-21BE targeted at 3.5%, 3.3% and 3.1% for 2021-22 and 2022-23 respectively. • Disinvestment receipts anticipated to be Rs.2,10,000 crore in 2020- 21BE. • Gross market borrowings are slated at Rs.7.8 lakh crore, while net market borrowings are slated at 5.36 lakh crore. BE=Budget Estimates, RE=Revised Estimates; GDP=Gross Domestic Product KEY HIGHLIGHTS PROMINENT THEMES OF THE BUDGET Agriculture, Industry, Women & Child, Irrigation & Rural Commerce and Social Welfare Development Investment Wellness, Water Culture and Infrastructure and Sanitation Tourism Education and Environment and New Economy Skills Climate Change KEY HIGHLIGHTS AGRICULTURE AND RURAL ECONOMY • Total Allocation towards Agricultural and allied activities, Irrigation & Rural Development spends is Rs 2.83 lakh crore for FY21BE. • Government committed towards doubling farmer income by 2022. • Agriculture credit target for the year 2020-21 set at Rs. 15 lakh crore. Expansion of NABARD Refinancing Scheme, while MGNREGS to be used to develop fodder farm. • Expansion of PM-KUSUM scheme to provide 20 lakh farmers for setting up stand-alone solar pumps and help another 15 lakh farmers solarize their grid-connected pump sets. • Scheme to enable farmers to set up solar power generation capacity on their fallow/barren lands and to sell it to the grid. • Indian Railways will set up a “Kisan Rail” in PPP mode to build a seamless national cold supply chain for perishables. • Krishi Udan scheme to boost agricultural exports in both international as well as domestic routes. • e-NAM to be integrated with financing of negotiable warehousing receipts. • Village Storage scheme to provide farmers a good holding capacity and reduce their logistics cost. More focus on Zero Budget farming. • One product for one district, so that focus is given at district level for better marketing and export of horticulture. • Change in incentive scheme for chemical fertilizers, shall encourage balanced use of all kinds of fertilizers including the traditional organic and other innovative fertilizers. • Doubling of milk processing capacity from 53.5 million MT to 108 million MT by 2025. • Raising fish production to 200 lakh tonnes by 2022-23 and fishery exports to Rs.1 lakh crore by 2024-25. • Take up comprehensive measures for 100 water-stressed districts KEY HIGHLIGHTS INFRASTRUCTURE OUTLAY • Allocation towards transport infrastructure is Rs. 1.70 lakh crores for FY21BE; defense outlay is Rs. 4.71 lakh crore for FY21BE. • National Infrastructure Pipeline of Rs.103 lakh crore launched in Dec 2019 which consists of more than 6500 projects, focused on improving ease of living for the citizens. • Development of 2500 Km access control highways, 9000 Km of economic corridors, 2000 Km of coastal and land port roads and 2000 Km of strategic highways. • Delhi-Mumbai Expressway and two other packages would be completed by 2023 . Chennai-Bengaluru Expressway would also be started. • Monetize at least twelve lots of highway bundles of over 6000 Km before 2024. • Allocation towards power and renewable energy is Rs. 0.22 lakh crores for FY21BE. Promote replacement of conventional metering system by “smart” metering system. • Expand the national gas grid from the present 16200 km to 27000 km. • “Arth Ganga”. Plans are afoot to energise economic activity along river banks. The Jal Vikas Marg on National Waterway-1 will be completed. Further, the 890 Km Dhubri-Sadiya connectivity will be done by 2022. • 100 more airports would be developed by 2024 to support Udaan scheme. Air fleet number shall go up from the present 600 to 1200 during this time. • Budgeted Railway improvement measures are setting up a large solar power capacity alongside the rail tracks, 4 station re-development projects, operation of 150 passenger trains, more Tejas type trains, high speed train between Mumbai-Ahmedabad and 148 kms long Bengaluru Suburban transport project at a cost of Rs. 18600 crore. • Providing digital connectivity to all “public institutions” at Gram Panchayat level through FTTH connections under Bharatnet programme in 2020-21. 6000 Crores have been allocated towards Bharatnet. KEY HIGHLIGHTS FINANCIAL SECTOR REFORM • Deposit Insurance Coverage to increase from Rs.1 lakh to Rs.5 Lakh per depositor. • Eligibility limit for NBFCs for debt recovery under SARFAESI Act proposed to be reduced to asset size of Rs.100 crore or loan size of Rs.50 Lakh. • Separation of NPS Trust for government employees from PFRDAI. • Proposed to introduce a scheme to provide subordinate debt by banks for entrepreneurs of MSMEs that shall be counted as quasi-equity and would be fully guaranteed through the Credit Guarantee Trust for Medium and Small Entrepreneurs (CGTMSE). • Proposal to sell balance holding of government in IDBI Bank. • FPI Limit for corporate bonds to be increased to 15% from 9% of outstanding stock. • New debt ETF proposed mainly for government securities. • Specified categories of government securities would be opened for non resident investors • Proposes to sell a part of its holding in LIC by way of Initial Public Offer. • Start-ups with turnover up to Rs.100 crore to enjoy 100% deduction for 3 consecutive assessment years out of 7 years. • Turnover threshold for audit of MSMEs to be increased from Rs.1 crore to Rs.5 crore, to those businesses which carry out less than 5% of their business in cash. • Dividend Distribution Tax shifted to individuals instead of companies • Propose to extend handholding support in selected sectors such as pharmaceuticals, auto components and others to successful mid-size companies to encourage export. A scheme of Rs.1000 crore will be anchored by EXIM Bank along with SIDBI. • To launch new direct tax dispute settlement scheme -- Vivaad se Vishwaas scheme. KEY HIGHLIGHTS OTHER INITIATIVES • To promote Textile Export, National Technical Textiles Mission proposed with a four-year implementation period from 2020-21 to 2023-24 at an estimated outlay of Rs. 1480 crore. • Set up Viability Gap funding window for setting up hospitals in the PPP mode, giving priority to districts where there are no Ayushman empanelled hospitals. Allocation towards health sector is at Rs. 69,000 crores • Commitment to end Tuberculosis by 2025. • Expand Jan Aushadhi Kendra Scheme to all districts offering 2000 medicines and 300 surgicals by 2024. • Total allocation for Swachh Bharat Mission is about Rs.12,300 crore in 2020-21. • Rs.11,500 crore allocated towards Jal Jeevan Mission, which aims to provide piped water supply to all households. • About Rs.99,300 crore allocated towards education sector in 2020-21 and about Rs.3,000 crores for skill development. • About Rs.27,300 crore allocated towards Industry and Commerce. • Propose to develop five new smart cities in collaboration with States in PPP mode. • To achieve higher export credit disbursement, NIRVIK is being launched, to provide higher insurance coverage, reduction in premium for small exporters and simplified procedure for claim settlements. • Digitally refund to exporters, duties and taxes levied at the Central, State and local levels. • Proposed outlay of Rs.8000 crore over a period of five years for the National Mission on Quantum Technologies and Applications. • An allocation of Rs.3,150 crore towards Ministry of Culture for 2020-21, to develop 5 archaeological sites as iconic sites, and take up several museums across the country for renovations. TAX PROPOSAL DIRECT TAX INTRODUCTION OF NEW TAX REGIME: • A new taxation regime has been introduced. Individuals can choose to forego deductions and exemptions, and avail lower tax rates upto a limit. Viability will depend on list of exemptions given up – projected tax revenue loss of Rs. 40,000 crore in the year. • Under the new regime, a person earning Rs.15 lakh in a year and not availing any deductions etc. will pay Rs.1,95,000 as compared to Rs.2,73,000 in the old regime. Thus, his tax burden shall be reduced by 78,000 in the new regime. The new Tax Regime is for taxpayers who forego deductions and exemptions such as:- • Standard Deduction • Leave Travel Allowance • House Rent Allowance • Interest and principal repayment in respect of self-occupied property • PPF, insurance premium, mediclaim premium, NPS contribution However, opting the new tax regime is optional for tax payers TAX PROPOSAL DIRECT TAX • Introduced TDS on capital gains in mutual fund for resident individuals.